It’s not wise to borrow more money to get yourself out of debt, but when it comes to a consolidation loan, it may be the perfect solution for you. You’ll save a lot in terms of interest payments every month and also have only one loan to repay, instead of multiple creditors.
Plus, these consolidation loans have a fixed interest rate, and your loan principal goes down as you make your loan payments—so you can stop your high interest credit card debt from spiralling out of control. If you’re making the minimum monthly payments on credit card debt, chances are you’re mostly paying the interest, and not paying down the actual principal by much. This won’t make much of a dent in your debt.
And if you miss payments or exceed your limit, your credit card interest rates can go up. Replace your credit card debt with a Prosper consolidation loan, where your interest rate won’t change and your loan principal gets paid down as you make fixed monthly payments.
Most lenders will look at your credit history. If you are sure you have bad credit, you may want to consider improving it before you apply. If you are not sure of your credit score, they can help you find out with no obligation.
Banks do offer unsecured consolidation loans but you need to have a clear ITC in order to qualify. You can get a consolidation loan from private companies and these amounts may vary according to your credit risk. The other type of consolidation loans you get is a secured loan. This means that you use your house or assets as security or collateral against the loan. This option is much easier to qualify for provided that you have enough equity left in your house. You also get much lower interest rates as compared to unsecured loans.